by Bob Stokes
Updated: November 10, 2016
[Editor's Note: The text version of the story is below.]
On Nov. 9, the behavior of gold was similar to stocks and currencies; they all had big moves.
Gold had a wide trading range of $68. Its price surged to $1337.81 in the futures market late the night before, and then fell to $1269.51 during New York hours.
Mainstream analysts and the financial press attribute gold's rise in volatility to the U.S. presidential election:
But were investors' worries about the U.S. election the real reason for gold's volatility spike?
More than a month ago, our October 2016 Elliott Wave Financial Forecast provided this analysis and forecast:
Gold’s sideways trading range since late June coincides with a steep drop in volatility, as shown on this graph. The CBOE Gold ETF VIX index is down over 39% since June 24 and last week hit its lowest level in over a year. Low periods of gold volatility precede high periods of volatility, similarly to other assets, and we expect gold’s VIX to jump in coming months. A 324-day cycle, shown to be turning up on the lower part of the graph, is compatible with a rise in gold’s VIX.
Right after our forecast, gold's volatility started to rise.
Our Nov. 9 Short Term Update showed this chart and said:
The chart zooms in on Gold's VIX (GVZ) from May to the present and shows that volatility jumped 53% from September 30 to November 4, and has dropped sharply over the past three days.
Don't be surprised if the volatility in gold continues.
Gold hit a low of $1046.20 on Dec. 3, 2015. By July 6, the yellow metal hit a high of $1375.53.
Midday on Nov. 10, gold traded at $1265, and investors are wondering if the precious metal will make another stab at its high.
Right now, the Wave Principle is offering valuable insights.